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March 1, 2011
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Banking: New Technology Is All Thumbs

Rise of mobile phone banking meets customer desire for a wider array of fast and convenient service

By Feoshia Henderson

Good customer service in banking centered for decades on the human touch: a friendly word, a handshake and a smile. Increasingly, though, customers prefer the feel of their cell phone, and banks are beginning to accommodate them.
The days of walking into a bank (or sitting in a car), chatting with a teller and filling out deposit slips aren’t over, but it seems a lot people wouldn’t mind if they were.

In retail banking, as in many commercial transaction sectors, good customer service more often is about speed and convenience – forget the teller and deposit slip. Instead, some forward looking Kentuckians now can deposit checks by clicking their cell phone camera and sending a text (or multimedia messaging service – MMS) photo to the bank of the check’s front and back. After checking their account online – perhaps by text message also – and seeing the deposit clear, they can shred the check at home.

Large national banks with the deepest pockets are forging the new-technology way. It’s a time-consuming and costly investment to assess the market, create a service, vet providers and deploy an innovation. That’s one reason Kentucky-chartered institutions are not the earliest adopters.

However, bankers in Kentucky are well aware that more than 80 percent of people have cell phones, and they typically are not more than 18 inches from their body. Cell phones provide 24/7 access to customers.

“Today, with customers it’s all about convenience,” said Nancy Norris, a spokeswoman for Chase Bank, which offers mobile deposit via applications for iPhone and Android systems. “What our customers have told us is that they want a traditional bank in their community, but they also want online and mobile banking, and ATMs everywhere. It’s about what’s convenient for you.”

Chase is the first – and so far appears to be the only – bank in Kentucky offering a limited cell phone deposit option. However, several are testing mobile options, and Chase plans to expand their’s.

Banks chartered by the state are up to national industry standards in offering online banking, but rank in the middle among states in embracing mobile technology.

Kentucky banks “are more conservative as far as mobile banking, but the majority of our banks are online. It’s fair to say we aren’t on the cutting edge of mobile banking,” said Kelly May, spokeswoman for the Kentucky Department of Financial Institutions. “We let others start it up and work through
the mistakes.”

If mobile banking service proves popular in early testing, May believes more will start implementing the technology – which is not cheap – from national banks down to the smaller ones.

“You’ll see this becoming available in metro areas more quickly, and I think you’ll see the national banks outlaying significant capital in implementing this new technology. Then you’ll see some of the larger community banks, then smaller banks using it – if it’s a popular service,” she said.

Banks turned to the Internet years ago when the home computer became commonplace, allowing customers to check balances and receive statements by e-mail. The array of online services has grown more sophisticated, though, as technology has become easier to use and more widespread.

Presently, banks across Kentucky are meeting customer service demands with a widening array of online and mobile banking options – 24 hours a day without leaving home or talking to a teller. Services vary by bank and are geared to individuals and businesses. Internet banking has become an industry standard, and many are testing various mobile banking options.

Republic Bank of Louisville was ranked among the top 10 in the nation by Bank Director magazine in 2008 and 2009 for overall bank performance. Republic’s website presents an example of online banking.

Customers can apply to open a checking or savings account, pay bills, apply for a mortgage or home equity loan, and order checks. Questions about a service? With the click of a mouse, they can chat live with a bank representative. They can activate mobile service for their text-enabled phone.

Republic Bank is among those stepping outside traditional banking services with an online personal finance management tool. Its FinanceWorksTM, which launched last year, tracks ATM card and checking purchases.

“With FinanceWorks, you can look at where all of your money is being spent.
All of your expenditures are categorized by food, clothing, entertainment, medical expenses, etc.,” said Michael Sadofsky, the bank’s senior vice president of marketing. “It does this for you automatically, based on where you spend your money. If you go someplace it doesn’t recognize, you can enter a category and the system will learn it.”

Account holders can add outside credit cards to the system to get a more complete picture of spending patterns, he said.

“You can set budgets for all your categories, look at your cash flow and all of your expenses. It’s a complete budgeting tool,” Sadofsky said.

Online banking services continue growing, but for some customers it’s already passé. Mobile banking, done with common cell phones or more advanced smart phones, is the future of high-tech banking. Research finds a growing segment of young adults reluctant to engage in any service not available by cell phone.
Chase is the front runner in smart phone technology with its deposits option – introduced last year as an iPhone app but now available to Android-system smartphones, too.

Customers elsewhere whose cell phones have text capability can use many other mobile banking services of varying complexity, such as locating the nearest branch or ATM.

Many banks, including Republic, allow customers to check account balances, recent transactions and transfer funds by sending text commands to a number supplied by the bank. Want to know how much is in your checking account? Text “BAL” to a bank number and the balance pops up in a text reply on your phone within seconds.

Other options include text and e-mail alerts to notify customers if an account dips below a dollar level set by the user – who can then transfer funds from another account, by phone or computer, to keep from overdrawing.

As people use their phones for everything from watching videos to listening to music and playing games, they’re expecting to do more things, like banking, with them, too, Sadofsky said.

“Phones can be used for a lot more than talk. People have their phones with then all the time, and they want to be able to be able to use their phone to help them with things,” he said.

Pikeville-based Community Trust Bank is Kentucky’s largest state-chartered institution (Republic is No. 2.). Community Trust plans to phase in mobile banking late this year, President and CEO Jean Hale said. Online banking is popular with Community Trust customers, and more than half of its 26,537 online banking users use the site’s bill pay service.

Mobile banking is the next logical step.

“Our online banking services are used by both individuals and businesses in servicing their particular needs. We expect to begin our mobile banking with our individual customers and then move toward making it available to our business customers,” Hale said.

Kentucky banking officials indicate they expect broader mobile service rollouts by state-chartered institutions in 2012. Because of the penetration of cell phone usage among the general public, mobile services are even viewed as a route to reach the unbanked.

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